Trump executive order expands association plan options for small employers

(Bloomberg) — President Donald Trump signed an executive order Thursday designed to expand health insurance options for some Americans, in a move that may also undermine coverage for those who remain in Obamacare.

The order directs federal agencies to take several actions through federal rule-making. Small employers would potentially be able to band together from across the country to create “association health plans” and buy insurance together outside of Obamacare. The order also calls for expanding the availability of low-cost, limited, short-term insurance plans, as well as the use of tax-advantaged accounts to pay for health-care expenses.

“We’ve been hearing about the disaster of Obamacare for so long,” Trump said in signing the order at a White House ceremony. “For a long time, I’ve been hearing repeal, replace, repeal, replace.”

Bloomberg/file photo

“The policies outlined in the executive order are the beginning of the actions the administration will take to provide relief to people harmed by Obamacare,” said Andrew Bremberg, director of the administration’s domestic policy council, on a call with reporters earlier Thursday. “You should expect additional actions coming from the administration in months to come.”

Critics have said that such actions will end up pulling healthier people out of Obamacare’s existing markets, which have strict requirements on what services have to be covered, such as maternity or mental health coverage. The result would be fewer people in the Affordable Care Act’s markets, and the ones who remained could be sicker -- driving up premiums, and forcing more people to look elsewhere for coverage.

“It would essentially create a parallel regulatory structure within the individual and small group markets that is freed from the various consumer protections established,” said Spencer Perlman, a policy analyst with Veda Partners, a Bethesda, Maryland-based advisory firm. “The end result could be a death spiral for ACA-compliant plans.”

More limited?The administration order on association plans is focused on businesses, however, not individuals — meaning it could have a more limited effect in terms of how many people would take advantage of it. According to a summary of the executive order distributed before the planned signing, employers in an association plan “cannot exclude any employee from joining the plan and cannot develop premiums based on health conditions.”

The order comes on the heels of Republicans’ failed attempts to repeal the Affordable Care Act. It would likely require new regulations, meaning that the plans the order is expected to encourage wouldn’t be available until any new rules are in place.

Trump is scheduled to sign the order at the White House at 11:15 a.m. On Tuesday, he tweeted, “Since Congress can’t get its act together on HealthCare, I will be using the power of the pen to give great HealthCare to many people - FAST.”

The short-term plans would create another option outside of the ACA, allowing people to buy low-cost, temporary plans, instead of more comprehensive, longer-term coverage, according to the summary. Such plans would not be “subject to costly Obamacare mandates and rules,” according to the summary, and would be used by people in between jobs or who didn’t like the options they had under Obamacare.

Tax accountsThe order also directs federal agencies to expand use of “Health Reimbursement Arrangements,” which are employer-funded, tax-advantaged accounts used to help workers pay for health-care costs.

Association health plans were more common before Obamacare. Christopher Condeluci, a former Senate Republican aide who now runs his own law and consulting firm, said the plans “came crashing down” after a 2011 rule from the Centers for Medicare and Medicaid Services that said small employers could no longer band together in large groups to buy coverage.

Since then, individuals and small groups of people have either had the option to sign up for insurance in the Obamacare markets, or buy outside them. Subsidies are available up to a certain income level for people who buy on the markets.

According to the Internal Revenue Service, 12.7 million taxpayers claimed a health-care coverage exemption on their tax forms, some because they couldn’t find an affordable plan.

Cheaper optionCondeluci said people are sitting on the sidelines because the individual market is too costly.

“Now, there might be an option for them,” he said.

About 83% of the 12.2 million people in the Obamacare marketplace receive subsidies, also known as premium tax credits, to help cover the cost of insurance premiums, according to the Centers for Medicare and Medicaid Services.

For those who don’t get subsidies, the coverage can be expensive. The average monthly premium for a family of four with a $60,000 annual income was $1,090, or $13,080 a year for a mid-level “silver” plan, according to a 2016 report from the U.S. Department of Health and Human Services.

Comments(1)

We already have purchasing groups that lump multiple employers together for the purpose of spreading risk and negotiating discounts. These groups have been and will continue to be larger and more powerful than the largest and most successful association you could ever put together. They're called insurance companies.